Jim Cramer recommends starting a position in 'star' IPOs Doximity and Upstart

  • CNBC's Jim Cramer on Thursday recommended investors buy shares of Doximity and Upstart Holdings.
  • The "Mad Money" host said the two companies are "stars" of the recent IPO class.
  • "You can put on a small position here, then wait for a pullback to buy more if we ever get one," Cramer said.

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CNBC's Jim Cramer on Thursday recommended investors buy shares of Doximity and Upstart Holdings, labeling the companies as two "stars" of the past year's initial public offerings.

"Stars last for a long time. So will Doximity and Upstart," the "Mad Money" host said. "You can put on a small position here, then wait for a pullback to buy more if we ever get one. But you definitely want to buy something because Doximity and Upstart are the best of the best" of recent IPOs.

Shares of online health firm Doximity and online lending platform Upstart rose 13% and 4%, respectively, on Thursday. Over the past five days, Doximity is up 40% while Upstart has advanced nearly 34%.

Both companies reported quarterly earnings on Tuesday evening, and Cramer said they stand out from their newly public peers because they make money. Doximity debuted in June, while Upstart's IPO was held in mid-December.

Doximity, which offers networking and telemedicine tools for medical professionals, saw its revenue double the quarter ending June 30 on a year-over-year basis. It also earned an adjusted 11 cents per share. "Their EBITDA margin came in at 43%. Analysts were only looking for 30%. That's extraordinary," Cramer added.

Upstart, which uses artificial intelligence in software to improve the loan process, reported quarterly revenues of $194 million, up 1,018% compared with the same period last year. The company also reported net income of $37 million.

Upstart, founded in 2012 by former Google executive Dave Girouard, is "certainly a huge disruptor," Cramer said. "Their loan origination is so strong that one bank just suspended its use of FICO scores — turns out, Upstart is more effective."

The stocks of Doximity and Upstart may trade at high valuations, especially after their strong quarters. Investors need to recognize the shares "will never be cheap," Cramer said, "but I bet they still have a lot more upside."

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